The Coronavirus pandemic has impacted our lives in every way, including financially. Covid 19 has the potential to have a huge impact on property markets throughout the world. Homeowners, particularly those in the closed industries face genuine concerns over their future to remain on the housing ladder.
Read on for five ways to help manage your mortgage during the Coronavirus pandemic:
Five Ways to Manage Your Mortgage During the Coronavirus Pandemic
Assess Your Current Situation
It’s always good practice to regularly review your finances and current mortgage deal*. Make a spreadsheet of your current incomings and outgoings. While we’re living in financially uncertain times be honest with yourself about the worst-case scenario and take action. I think the Scout motto of “Be prepared” is very apt during these times.
*Top tip: always use a mortgage calculator, such as https://www.sofi.com/home-affordability-calculator/ to check that you can afford repayments.
2. Increase Your Income and Reduce Your Outgoings
Even in strong financial circumstances, there are ways we can increase income and reduce our outgoings. During the Coronavirus Pandemic make sure you’re accessing all the financial help available to you. There is financial support available for businesses that have had to close. If you are off work because of Coronavirus there is help available for you too. Take a look at the Government website for the help available in your country.
You may have found your outgoings have actually reduced as a result of Coronavirus since you no longer travel to work and eat out etc. Are there any subscription services you can cancel? While we’re home a lot we do want to enjoy streaming services but do you need to subscribe to them all at once or would one streaming service at a time be more economical both money and timewise.
3. Consider a Mortgage Holiday
After looking over your accounts, if you come to the conclusion that Coronavirus will impact your income for just a couple of months, it may be necessary to apply for a mortgage holiday.
You can request a payment holiday of up to 6 months in total, but lenders can only agree on a payment holiday of up to 3 months at a time. They can then agree to renew your payment holiday after the first 3 months, as long as this doesn’t take you over the 6-month limit.
You need to apply by 31 March 2021 and all payment holidays must end by 31 July 2021. Remember, carefully consider if you need a payment holiday – and make payments if you can.
- when your payment holiday ends, you’ll still have to pay back what you owe
- interest will continue to build – unless your lender has told you otherwise – so your repayments may increase after the holiday
- if you take a payment holiday, you will likely end up paying more in the long term
Remember that you will end up paying more in the long run, but if this is the respite that you need just to get you through this difficult time then take advantage of it.
4. Remortgage Your Property
Each year when you look over your accounts also take a good look at your current mortgage deal- perhaps it’s time for you to remortgage? Around a third of all home loans made in the UK are actually remortgages. A remortgage is where you take out a new mortgage on a property you already own – either to replace your existing mortgage or to borrow money against your property.
Reasons to consider remortgaging are:
- Your current “deal” is coming to an end and you want to shop around for a better one
- You want a better rate
- You want to overpay your mortgage (more on this below) and your current lender won’t let you
- Your house value has increased a lot
- You want to borrow more money (something I’d personally advise against if you can avoid it)
5. Pay Off Your Mortgage Early
If your accounts are looking healthy, consider making overpayments on your mortgage to pay off your mortgage early. I know, particularly as the end is in sight, it’s even more tempting to pay off and free up your money for the future. I am definitely going to celebrate the day that my mortgage is completely paid off. Make sure you use a Mortgage Calculator to help you decide if this is worth doing. A calculator can also help you decide whether it’s best to make one overpayment (perhaps invest the money you have saved on not going on holiday this year for instance) or to make regular monthly overpayments. The Extra Payment Calculator is so easy to use, just input details and find your results. I found the Extra Payment Calculator particularly useful and found out I could pay my mortgage off in five years (five years early) by making regular monthly overpayments of £291.98. Use these calculators to help decide which is the best way forward for you.
During the Coronavirus pandemic, dealing with finances can be a stressful time. If you are worried about paying your mortgage:
- continue to pay your mortgage (if you can)
- speak to your mortgage lender (you may be able to apply for a 3 month payment holiday)
- agree a repayment plan with your mortgage lender
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